Transcripts For CNBC Squawk Box 20130221

Coming under pressure amid questions about the feds commitment to keeping borrowing costs low and the spigot open. Economic tests, key reads on jobs, inflation and housing and on the corporate front, really Important Quarterly results from dow component walmart. Its thursday, february 21st, 2013 and squawk box begins right now. Morning, everybody. Welcome to squawk box here on cnbc. Im becky quick along with joe kernen and Andrew Ross Sorkin. Stocks selling off late yesterday after the release of the fomc minutes. The s p and the nasdaq turned in their worst sess sessions of 2013 on the heaviest Trading Volume of the year. Not good news. The pain is not over yet. If you take a look right now, dow futures are down by about 61 points. S p futures off by about 7 1 2 points below fair value. Were going to talk much more about the fed with central bank watcher greg iff. Thats 7 00 eastern time. Walmart is likely to be a big driver of the market conversation today. Courtney reagan will be joining us with a preview in just a few minutes. Then well bring you walmarts Quarterly Results the second they hit the tape. Along with complete analysis and reaction from the street and, of course, you cant talk about the consumer without talking about energy prices. And rising gasoline costs at the pump, weve been watching everything that happens with Oil Prices Moving higher. Yesterday they actually sold off, but that is not much relief to those who have been paying higher price e at the pump for the last month. Joining us in the next hour, oil man Boone Pickens. So the economy is at the top of the hour. Andrew will get you up to speed on the days other headlines. Hedge fund manager David Einhorn is taking his Apple Campaign directly to shareholders. Hes going to be hosting a Conference Call today to argue the merits of distributing hedging preferred stock which, of course, is what this big debate is about. Einhorn is battling and seeking an injunction next week to abolish a system for issuing preferred stock. I got a letter overnight from the Nations Foundation which has a stake in apple and they are pushing back against David Einhorn, something we should probably talk about a little later. We will. Also in the news this morning, boeing is expected to meet with the faa tomorrow and launch a formal plan to get its grounded 787 back into service. The company will be proposing a resign of the dreamliners batteries. Officials say the jets could be back in the air within two months. Finally, appear highser bush, inbev want a court to grant a short delay in proceeding as the two sides hold settlement talks. They have been locked in a battle over whether the beer giant can expand its stake in mexico modela. Ice fascinated by the markets, but weve got other headlines. Well get back to this in a second. The fed. The fed. We want to talk about that and what happened in the markets yesterday and whats happening today. But, lets talk a little bit about dow chemical. A federal judge, a jury, actually, has ordered the company to pay 400 million on a price fixing case. That will teach them. Dow was one of several companies, Chemical Companies named in a Class Action Lawsuit alleging conspiracy to fix urethane chemical products. What is that . That is used to make cars, furniture and packaging. But it was the only defendant not to settle. Take you on the dwoft. Dow plan toes seek to dismiss the lawsuit in a post trial motion. The National Futures association is going to discuss a plan to ban john, i saw corzine and i almost thought that was another chemical, but it isnt. Were talking about the guy, jon corzine. He is toxic to investors. From the futures industry for life at issue is whether the former ceo of mf global protected the failed brokerages customers. Spotted a few times in the hampton, the you know who else made page six yesterday as being happening and being somewhere . Duck fulds. Really . Yes. Where did you see him . I dont know. He was somewhere. And he was mentioned just as being there. Not as no. Dick fuld was out and about like a happening they didnt call it the former it doesnt matter. It doesnt matter how you get there. With the post, you get there. He got there in a better way than kardashian, right . We dont have a porn flick. That depends on what investors you add. Right. And newly elected National Board Members Association are seeking aggressive action against mrr corzine, but others worry about the potential impact on a probe by another regulator. Youre discussing probe simulation was on camera there. I told you you know i dont like that word. Theyre shooting you wider. Im trying to make you laugh from off camera, but i got caught. Theyre shooting you wider and now every time i move, im in the shot. You get above 40 and probe has a whole new meaning. Yes. I get caught and i try to do this off camera so i can play nbt. And the Justice Department is investigating jpmorgan over bear stearns mortgage product. Theyre looking into whether bear stearns altered Due Diligence information. You crossed them. That third parties provided about the quality of Mortgage Loans packaged into securities and jpmorgan has pushed back against various government suits seeking to hold the bank accountable for bears related misconduct. Weve seen that. Weve seen the weve seen seen important government officials and regulators talk about bank of america and what they did and moynahan. And theyre talking about countrywide and same thing sort of with behr. But it was companies that were taking over that when you take someone over, you take over all the bad rep. A lot of these deals were made in the very quick stages late in the night. They wanted deals done before the market opened overseas. You are high and tight with that, too. That is marine like. You got a haircut, too. Yeah, but you but you look very clean cut. Its a good look for you. Because you can pull it off. I kind of need to distract people with my hair so they dont look at the rest of my i think you look great. Distracted from this and this and this and all this other you know, anyway. Lets talk about the i want to talk about the market. The big story, the markets. We knew that the fed was going to come out with the minutes yesterday. A lot of people expected that you would hear more talk about when and how they get out of things. Thats exactly what the market heard, but the market didnt take it very well. You did see a massive selloff yesterday. This was the worst day of the year for the s p 500 and the nasdaq. This is the biggest decline for both of those indices since back to november. The dow had its worst day since february 4th. This is the heaviest Trading Volume of the year on the nyse. If you take a look at the futures, theyre indicated lower this morning. Dow futures down by about 50 points. S p off by six. So probably not a huge surprise to hear what the fed was saying, but now people are start to go think, oh, the end of the year . May not even make it there. Im surprised. It depends on who the people are. Ill tell you why im surprised. Because the fed, when they decided to do a lot more, we were under the impression that the economy was doing pretty well and we were all wondering, well, maybe they know you know, these guys know what theyre doing. And now, it seems like with gas prices, maybe thats part of it, but it looks like things arent as great as we thought. We had that print of minus 0. 1. They seemed to sure and now theyre showing doubt about whether they should. And it was like, did you know before that it was they dont know it looks like they dont know what theyre doing. Now they decided that they dont need it . Were going back above 8 on unemployment. It depends on who those people are, where bernanke comes down in this camp. Theres part of me that thinks theyre stuck through 2013 no matter what. And theyre just starting from no, i think through this year. I think qe infinity is going to continue after this year . Yeah. No, i dont. Its down today and the chart pattern is showing a double cross. That means people who own it are getting double crossed is what it means. But is it crossing the double cross at this point . Is this the twoday average kosing it was pretty close to it. But thats chilly, the notion that the fed might be let me ask you, which way is it could take them a year to have to finish that. Which way is unemployment going right now . We dont know. But its possible that we may get above 8 again. And its weird that that is their whole deal with the fed is getting to full employment. And now theyre talking about backing off whether we maybe head back up the. So we had david tepper here, what, two months ago . He said, look, you have to play. Theyre in it to win it and theyre in it till 6. 5 unemployment and thats the game. Every guy weve had on where weve mentioned the disconnect between the stock market and economic fundamentals, they all bring up the fed. Right. And the fed is not anywhere near these levels. Exactly. And if you cant count on the fed, then its all were going to talk to greg later. All betts are off. David joy. Yeah, david joy yesterday. I was not as skeptical reading i as the markets seemed to be. I wasnt surprised to continue to see the concerns that were raised. Greg ipp has some real thoughts about this. If you looked at some of those others markets, crowd oil had its worst days since january 16th. We showed you gold. The dollar had its best day i think in seven months. Europe fell back below 1. 33. Still there today. Dollar is stronger against the euro once again. Euro is at 1. 3182. So all of these things are continuing to cycle through. People try and get a feel for where the fed is headed next. Got it. Before we fly to london to complete the narrative on dick fuld, it was a jet blue flight from florida to new york. They were giving him a hard time saying hit drivers was teaching him how to use the jet blue ticket counter. That part of the story cant be true because hes been taking jet blue for years. They have a place down in jupiter and whoa, whoa, the New York Post is saying something thats not completely true . No. Im sure he was on jet blue, but but theyre spinning the article in a way that might not be accurate . The New York Post without maybe attribution and sources and Everything Else . No comment. Time for the Global Markets report. Kelly evans is standing by in london. Good morning to you, kelly. Andrew, good morning. Now, jet blue doesnt, but i can tell you theres not a lot of positive news to come out of europe this morning. If you guys want to look at why futures are pointed lower today, wall street has a lot to do with the activity youre seeing behind me. Theres only about a Dozen Companies that are in the green this morning. The stoxx 600 is down about 31. 3 . The ftse mib, down almost 3 earlier, now 279 . This after we got a slew of flash pmi data. One of the earliest reasons for the activity, guys, it was weak. It was contracting in a faster than expected pace. A reading of under 48 compared with 49 as hoped. And youre looking at the damage. Xetra dax down 1. 8 . The cac 40 roughly the same amount as france that in particular was a weak spot. The ftse 100 down by 1. 7 . A pretty big move for this index. Nevertheless, spain went to auction. Managed to raise more than it had targeted in terms of three bonds, including a tenyear. So youre seeing, in fact, green on the board when it comes to the bond yields. It is not necessarily a sovereign bond driven move. This seems to be one more driven by growth worries coming out of the eu. Take a quick look at the damage thats brought in terms of the currency board. The euro over here, there we go, dooits its down about 0. 8 . As for sterling thats also weaker, but just a little bit. The dollar did strengthen significantly after the fed yesterday. Everyone is saying its an overreaction to the fed minutes. We know that what theyring god is conditions dont stay put. Back over here, citis chairman is not seeking a breakup of the bank. A story in todays wall street journal says Michael Oneill was among those encouraging investors not to break up the bank. He is backing abroad cost cutting plans, but exploring a breakup is no longer said to be among his top priorities. And top equity firm sports ing represents tennis players and lots of people including super model giselle bundchen. Back in the day owned roger federer. The decision to sell has been driven by the trustee who own tess state of the former ceo and chairman. Peemp say it could fetch mother than 2 billion, but theres a huge fight going on among the banks out there to represent this yield and so many of them thought they had the end because they had been with teddy for so long. They were friends with teddy, the trustee who runs this process. Only knew teddy for the last two years of his life. So there are banks and bankers who said ive been blanking with him for 20 years. He was my best friend. I promised i would get the deal. But everybody is there and now theres a big battle about who is going to get the speech. So they wanted to put ing up for sale earlier. But given where the economy was, they have about a year to sell the company before they have to get back to investors to get an extension. As we mentioned, walmart is set to report Quarterly Results this morning. And courtney, we saw the fed yesterday. I would almost say that walmart has a chance to make almost as much news based on what they tell us about the current state of the consumer and what they think over the next three months. I think so, too. So they will always give us what their top three worries are, which i think may be more of interest this time and another time, gas prices, payroll taxes, joblessness, food taxes. But as of investors werent focused enough on walmart earnings, walmart executives discussed disastrous sales in january suggesting people arent spending as much. The ceo did say current macroeconomic conditions continue to impact our customers. Naturally people want to know if those concerns are weighing on customer sales and projections. Wall street is looking for 1. 57 a share on 128. 8 billion in revenue. Thats the higher end of walmarts previously issued guidance range. The Worlds Largest retailer forecast, the u. S. Key samestore sales to grow between 1 and 3 . Last years Fourth Quarter grew 1. 5 year over year. But beyond financials, investors will look into possible investigations. There hasnt been a clear timeline as to when the investigation results will be released from the allegations that walmart issued millions of dollars in bribes to officials in mexico. If you remember, it was last quarter that walmart stated an s. E. C. Filings that they have expanded those investigations beyond just mexico and to brazil, china and india. You know, this is going to be a fascinating story today. We heard about these leaked memos. Walmart knocking it down saying things were taken out of context. I saw something overnight from the nrf, National Retail federation where they said Something Like six out of ten americans say their savings and their budgeting has been somewhat or greatly impacted by the changes in the taxes that kicked in at the beginning of the year. And i think its interesting because i think the january samestore sales were probably misleading. It takes a can couple paycheck cycles to see what the impact would be. Right. Gasoline prices up 45 cents in a month, thats a lot if youre working on a constrained budget. Its going to be a big deal. Walmart is more than 10 of overall retail sales in the United States, too. What we hear today for these guys really matters. It really matters. And now, are you on my side yet . To offset this weakness, we could use growth in some of these developed countries, couldnt we . Are you glad that theyre not doing what needs to be done with the local officials to grow the company . Are you happy that theyre yeah, theyre really straight and is narrow, but theyre not getting any growth. We could use it this quarter, couldnt we, andrew . Changing tune on the when in rome . Some envelopes attached to that. When in rome, do as the rome. If youre in china and you need to build a walmart, you need to do what you need to do at the you need to play by the rules in the foreign countries. You have to play by the rules in the country where youre based. Wait, whoa. You dont put our rules on well, take that up with the federal government. Sourtny, what time are the results right around 7 00. Were going to talk more about that. It is expected to be a big driver, todays Broader Market story. Well preview the session and talk more about the fed right after this. First, as we head to a break, take a look at yesterdays winners and losers. [ engine revving ] [ male announcer ] every car we build must make adrenaline pump and pulses quicken. To help you not just to stay alive. But feel alive. The new cclass is no exception. Its a mercedesbenz through and through. See your authorized mercedesbenz dealer for exceptional offers through mercedesbenz financial services. But at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real business. Welcome back. The selloff as weve been talking about follows are he are lease of the fed minutes. Oh, jim paulson, chief investment strategist at Wells Capital management and from the cme group scott nations, we need him, too, we always need him of nation shares. When i was just thinking again about this, jim, it wasnt a lot. But it was sudden. It was a hundred points, nothing to get upset about. And id be more worried if it was more, really violent i mean, if i was a bull, id be less concerned if it had been more, a really quick shake out. This reminds me of the way people come to grips with maybe the fed eventually exiting and maybe the start of some slow sort of maybe not a 10 correction, but we may not be talking about the same highs every day. Is that in your forecast, jim . Or do you think full systems go still . I think were due for a construction at some point here. Whether its now or later, were going to get one. We cant keep going up every day, as you say. The news yesterday certainly provides a way to have a little bit of a trader correction, i think. Was it unexpected, jim, that news yesterday . Did they really say anything or are they just start to go prepare us to be prepared . You know, joe, i personally think its a good thing. Ive been critical of the fed not normalizing their economy. The economy has clearly moved from crisis back to growth, if you will, a more normal economy. The fed is continuing to employ policies that are still crisis like policies. That you only use in terms times the national emergency. I think they need to normalize them. And i think its a good thing. I think people fear that the fed is going to stop and the market is going to collapse. I think yesterday is going to be reflected on as the fed saying theyre seeing a economy that doesnt stand as much on its own two feet. The economy was doing pretty well and we were shocked that they continued to be, you know, so accommodative. And now, i dont know whether its better than six months agnesly. Now im wondering whether they ever knew what they were doing. If theyre now questioning it how many times have you said that over the last three years . That must mean they dont know what the hell theyre doing. Scott, if they did it six months ago and they were sure it was the right move, now weve got gasoline prices, payroll taxes, all this other stuff happening to unemployment, were wondering whether its headed up or down at this point. Do they know what theyre doing . Well, i think you have to question are they telling us what is going to happen later in the year . I think theyre actually trying to figure out amongst themselves what theyre going to do. They dont know. No, they dont. I think the amount of discord is probably too strong a word, but the amount of disagreement in the minutes was, i think, more than people expected and another problem here is right now is that growth is slower than it was probably six months ago. Thats what i think. Absolutely. I think that the problem is, its like trying to get off of crystal meth a little bit at a time. Whats that like, scott . Do you know about that . Have you talked to someone . If i knew about it, personally, id be a little thinner. But the problem for the s p is that it is vulnerable right now. But im with jim, i dont think were going to have a giant correction. But 1350 to 1530 if we went halfway back, while the s p is still showing higher highs and higher lows, that would end if the s p got below, say, 1500. So were vulnerable right now. People have been waiting for a little bit of a correction. Im not sure who is left toni vest if we see lower equity prices. I dont know who is left to step in and buy if they think even if they think that theyre getting a bargain. But then i can from your side of things, jim, we would need to do this eventually. Yeah. And we know that. Even medium term or longterm, these guys let the economy take the training wheels off. Let us show that we can do it. But i still think initially so many people were tying the what they saw was a disconnect between valuations and fundamentals. They were tying that, well, youve got to fed. Well, youve got the fed. If you do take that away, there are some people that would think that this is sort of up on like on an air pocket, at least shortterm. I agree, joe. I think the worst thing the fed has done by overstaying their massive crisis like easing policy is theyve created this perception that this thing is just a sugar high. And its totally dependent on the Federal Reserve drip. Its not. I disagree that the economy is worse now than it was six months ago. We just came off a quarter where we created 200,000 jobs a month. Weve had a can i say consistent drop in the Unemployment Rate. House sg clearly at new highs for the recovery. Confident is at a fiveyear high. The Household Net Worth is restored. The burdens are down jim, all of that may be true, but the question is, the drip is going to come off and how do you play what has to be some form of shortterm pain even if you believe the longterm is a better swish . Well, i think that youre diversified for the shortterm pain and i think its very different to call that. You have to make two right calls, when it starts and when it ends. And i think people have not done well with that for the last three or four years. The right thing to do is sort of wait it out, if you will. And hang on. But i think this is a good thing. I think the fed start to withdraw means were going to have less down the road problems maybe from inflation from overstimulation and secondly its a vote of confidence for the first time to the markets and to the economy from the Federal Reserve. Were out of time. You have to remember what you were going to say now for options action on which is on. Tomorrow evening, thats right. Tomorrow at 5 00. So hold that thought. Thanks. Thanks, guys. Were going to continue this conversation after the break. Did the market overreact to the fomc minutes . Were going to ask a man who understands the central bank better than just about anybody else. Veteran fed watcher greg ip is going to join us on set when squawk returns. Step seven point two one two. Verify and lock. Command is locked. Five seconds. 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Weve been talking about the fed this morning and what investors should make of the latest fomc minutes. Joining us now, a cnbc contributor greg ip. Im glad youre here today. Weve been talking about some of your thoughts. How Ground Breaking was it . Was the markets reaction warranted . I think its interesting at the margin. I dont think its a game changer. Lets remember, these are the minutes, not a statement. You go back to the Statement Issued at the end of january, we all kaind called ate nonevent because there wasnt much change in in respect its the chairman that control tess statement. The minutes are the chance for the hawks and all those that disagree with the chairman to give their viewpoints and get them out there. The fed went to this new policy of saying were going to do unlimited qe until the Unemployment Rate shows substantial improvement. So the Unemployment Rate hasnt improved at all since that time. And i find it hard to believe if the fed saits say, oh, forget what we said and you think its just roudyness behind the scenes and were going to see a little bit of a calmer reaction when maybe bernanke is speaking next week . Yeah. So that cues us up for pretty important testimony next tuesday. Were going to find out, mr. Bernanke, do you agree with these people who worry about the costs or with the doves . So it really wasnt bernanke. It was the grambling. Some people dont realize how much bernanke shares some of the concerns. Every time he speaks in the press conferences, hes always talking, its not just the benefits of qe, theres costs. Lets talk about costs. One of the interesting passages in the minutes was that theres going be an open discussion about more reference for those costs. And hawks were hawks. Werent the moderates more hawkish . There was Something Different about the minutes, wasnt there . I think so. I sometimes wonder whether the agenda was set up to discuss some of these issues of costs. Now, i dont know, did you guys see a speech given by area my stein, the governor, about a week ago . Go out and read that speech. Stein has academically joined the board about a year ago and he gave an incredibly interesting speech about the return of pic bonds, the huge rise in high yield issuance. He is the person who i think hawkes and ben bernanke are going to listen to extensively. To the extend a guy like that is going to raise concerns about these low rates are felg the seeds of Financial Stability maybe all the m a activity, as well. And thats the thing. The market is now down 106 points because of these fed statements. I find it worrisome that that is all the market has to go on. And noouz you rate the prospect of taking that drip away, its but what is going to be the signal from bernanke . What is the one thing youre going to look for . Not from the minutes, or maybe that were going to figure it out from the minutes when theyre going to change their tune . First of all, you never, ever front runs the committee. So hes not going to give us that definitive statement next tuesday and wednesday about what happens next. What im going to do is parse his testimony to see how much he spends talking about costs, how much he spends talking about what speculation may be in the market, future inflation risks, the possibility the fed will eventually lose money . If he swells on these ix issues, that tells me the next meeting or two we need to how does he get away from the 6. 5 . I dont think he does. Greg has made the point that what theyre talking about now is not due to whether they think the economy is better or worse. Its the negative effects of the i didnt even think about that. They go from goldilocks to the opposite scenario. But no, i dont think theyre thinking about whether the economy is better or worse or up or down. But now theyre worried about picks and speculations and the negative effects of all the stuff theyve been doing. This is what i think has the market shaken up. That the fed may choose to stop doing the qe not because of substantial improvement, but because of all these things. The 6. 5 Unemployment Rate, remember, thats the threshold for raising the shortterm Interest Rates. That i dont think changes. They have been careful not to give us a date or a condition for when they stop quantitative easing. And one of the reasons they havent done so is because of the an sillry issues that theyre trying to consider. Instead of these guys being really pragmatic, you know, surgeons and, doctors that are educated and everything, i think theyre more like witch doctors, the more i watch. They do different dances and they see what happens and they hope that works. They dont know if its working. This is not a sign. Joe, these are rich doctors with ph. D. S, show a little respect. This is like a western versus eastern medicine situation . What are you all of a sudden they realize if you keep rates at zero and set prices, basically, there might be some dislocations so you might be causing some weird things to happen . They finally realize that . Thats what people have been saying all along. I think theyve known it all along. Its a question of how much concern you attach to these issues. And fronk frankly until that speech by stein came out a week or two ago the fed thought people were thinking too much about these things. I think it would be the height of irony if we had a credit bubble and we didnt get to enjoy a new boom in between. Even with regular doctors, andrew, you might have something. They may try gief Different Things and then the fifth things works and then they say this is what you had. Especially dermatologists. They try this, youve got this, youve got that and finally something works and its like, oh, okay. You had that. Tmi. Yeah, determine stolg gists. Greg, thank you. Thank you. Because i saul r. Elfstein didie was mad because matthew died in the second you just ruined i cant believe you did that. You know sybil died in childbirth, right . You didnt know that . Squawk is hopping behind the world with tesla founder latest Quarterly Results. Controversy over test drives of its model s is he dan and much, much more when squawk returned. You knew that. Wall smart stock is down on after hours trading. It was not all bad news for the electric carmaker. That kind of looks right there, becky. No, it doesnt. Its down below 36 and weve got it at 38. Cnbcs phil lebeau joins us now with some of his exclusive interview with lelan musk. Joe, i mentioned your name at the rest stop. Four or five people raised their hands. Did you see my name carved in a tree there . Thats not funny, phil. In the stall. Yeah. Lets talk about tells la and you and i can talk offlike about that. Tells la, the loss was wider than expected, coming in at a loss of 55 cents per share. That shared to the street expecting a loss of 53 cents per share. Last night, we had a chance to talk exclusively with elan musk. He said this was a watershed quarter for tells la. We feel that tesla has turned a corner. I mean, i really feel were at a stage right now where were profitable and weve got a lot of interest from people around the world. I think people will view this as an inflexion point, at a turning point in time when an electric car Company Became a truly viable company. Why is it a turning point . Well, tesla said yesterday it will be profitable this quarter, thats three quarters sooner than expected and that it expects to remain profitable from here Going Forward in the Fourth Quarter. They have their employees working a 70hour workweek in order to get nolgmodel ss off l. Cancellations did increase n Fourth Quarter and theyve increased since then. Theyre trying to weed out this backlog of 15,000 reservations online. If you order one, the average wait until you take delivery is five months. Thats far too long for elon musk. He wants to shorten that time. For the balance of this year, its going to be generally at least few months that you have to wait in order to receive a model s. But im hoping that by the time we get into 2014, it will be a matter of weeks between ordering a model s and receiving it. And if you take a look at shares of tel tesla and were looking at a oneyear chart here, it has sold off yesterday. A couple of things to keep in mind, they had some parts delays adding to their costs in the Fourth Quarter. Higher production costs in the forty quarter kept the Profit Margins from rising higher. They did swing positive, guys. They were at a negative 17 profit margin in the Third Quarter. Now they are positive 8 . And elon musk says they will reach their target of 25 profit margin by the end of this year. So an important quarter for tesla, especially with them saying, listen, we are now profitable for the First Quarter. We will be profitable and it will stay that way for the rest of the year. Guys, back to you. Phil, you liked that. Its a beautiful car. If you had a commute and lets say you do some stuff after work and you have a five or tenmile commute, you do a few things after work, if you have money and you really feel strongly about it, not using hydro carbons, if you have money, its a perfect answer. But what a pain. Its the second car, though, right . Yeah. Thats a pain for you to sit for an hour, drive two hours, sit for an hour. Joe, this is not a car that you buy and you say, boy, you know what . Im going to do a lot of drives from chicago and denver. Its just not a practical car in that regard. But if you were somebody, lets say you were living in los angeles and youre driving maybe 75 or 80 miles a day, maybe going to work and maybe youre going somewhere else, youre running a few errands, more than enough power to get you around. And thats why the adoption has been so strong early on out in california. And were starting to see it on the east coast, too. Andrew was right. He was talking about how its not a car thats set up to do some of the tests that were doing. This is more of a car that does exactly what you were talking about. That makes more sense. For now, definitely. By the way, do we think in two or three years, theyre going to have a car thats got more of an extended range . Is that coming . I think so. Theyre fairly optimistic that the technology and the research thats being done with regard to lithium ion batteries, with regard to that as well as advancements in the software and the vehicle, that theyre fairly optimistic that they will be able to extend that range over time. And we should point out, guys, you know, theyve got three range levels. We were driving the top range, which gives you 265 miles on a full charge. The lower end is the least popular of all the models that theyre offering right now. People are paying up to have that extended range. That makes sense. Phil, thank you. You bet. We will talk to you again soon. When we come back on squawk, the ceo of imax talks about the big business of movies on the big screen. A unique snapshot of the American Consumer right after this. Plus, Quarterly Results from dow component walmart. These are not numbers you can afford to miss. But ill tell you what impresses me. A talking train. 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What does this say about the American Consumer right now . I think id change the word american to Global Consumer. Because were in 54 countries. And if you look at what really made the difference this year was the International Box office. Imax is a play on the International Box office more than the domestic box office. So if you look at this last weekend, die hard opened in the United States, did fine. Did about 4 million in imax theaters but we had a film called the journey west that opened in china ill bet none of you guys caught that one this weekend. And it did over 3 million in china for three days. So we had different films playing in japan and all over the world. And it aggregated that story. Whats your margin on a high profile film like a die hard versus a lower profile film . Its hard to talk about margin unless you talk about box office because theres a fixed cost of converting the films into imax. Once you pay that fixed cost it just depends on how big the box office is. But you know, for example the one in china, that margin will be quite good because the box office already up to 7 million in a week. Right. The chatter on all the Message Boards is whether star trek is going to be imax. You may mean star wars. Im sorry, early in the morning, too. I apologize. Because star trek is being shot in imax. All the exterior scenes, j. J. Abrams is using imax cameras for. The reason for the chatter is j. J. Is also directing star wars. So a lot of the fans are hoping thats the case. I mean the problem is the script hasnt been written yet. I think j. J. Probably will be inclined to do as much as he can with imax, because hes a big fan, and you know, a great asset. A great friend of ours. But i think until he writes the script he cant answer that question. I think that is exactly the audience who is willing to pay up for the imax stuff because i think lord of the rings, i think the hobbit, any of these geek movies i see, these are the movies you want to see on a big screen. Absolutely. And 2015 is going to be a big year for us because the next avatar is coming out which did real well in imax. We have iron man 3. Right. We do have star trek. We do. Superman. Man of steel, g. I. Joe. Whats going to be the big winner . Hunger games shot with imax cameras. The next installment of the hobbit coming also in imax. Its always hard to say the big winners. Kind of like predicting stocks. How much negotiation do you have to do with the zreters to push the technology on them or do they come to you . How does it work . They really come to us now. And its no accident that the directors that come to us are the big name ones, jim cameron, steven spielberg, chris knoll, et cetera, because if you think about it, to paint your vision on the biggest cameras in the world, shown the best way, is really whats your investment in those films . It costs us around 1 million to convert the film to an imax film. Remember weve also built this global network, more than 600 theaters all over the world. So we get about 12. 5 from the studio for showing the film, and then we get anywhere from 5 to 20 from the exhibitor. Depending on the kind of deal. So, for some of these blockbuster films we dont really pay the actors, you know, we dont really pay the director but we could get up to a third of the box office. Youve been at the theme parks where ive been in one watching bugs where something comes out of the back of the chair and hits me in the neck. Ive had moisture hit when theres ice on the screen. And i mean, youre just visual and sound at this point. Would you ever innovate into where the seat moves at appropriate times or Something Like that . You know, we did that, joe, around 20 years ago and that time it proved to be a fad. I dont know if youve done something once, its going to be hard to convince. There are people saying thats the future, thats the way to go but i wonder. It seems a little bit like a fad. With audio you can almost get the feeling. And i dont know about smell. Where are you on 3d . Were a bit agnostic. We think its about the movie more than it is about the dimensions so we say whether its 2d or 3d as long as its imax its something really special. Walmart is coming up. Richard, thank you for coming in. When we come back we do have those Quarterly Results from dow component walmart. The state of the American Consumer. Ahead of that report the u. S. Equity futures are trading lower once again this morning after some big losses yesterday. Actually theyve improved a little bit. Dow futures still down by 37 points. I know what youre thinking. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready for real business. You are gonna need a wingman. And my cash back keeps the party going. But my Airline Miles take it worldwide. [ male announcer ] it shouldnt be this hard. With creditcards. Com, its easy to search hundreds of cards and apply online. Creditcards. Com. [ whirring ] [ creaking ] [ male announcer ] trophies and awards lift you up. But they can also hold you back. Unless you ask, whats next . [ zapping ] [ clang ] this is the next level of performance. The next level of innovation. The next rx. The f sport. This is the pursuit of perfection. Great, everybody made it. We all work remotely so this is a big deal, our first full Team Gathering i wanted to call on a few people. Ashley, ashley marshall. Here. Since were often all on the move, ashley suggested we use fedex office to hold packages for us. Great job. [ applause ] thank you. And on a protocol note, id like to talk to tim hill about his tendency to use all caps in emails. [ shouting ] oh im sorry guys. Ah sometimes the caps lock gets stuck on my keyboard. Hey do you wanna get a drink later . [ male announcer ] hold packages at any fedex office location. Volatility is back. The markets see their biggest losses yet for 2013. The vix spiking 20 . A look at what caused yesterday move and the markets next turn for investors. Gas price sticker shock. Prices at the bump up nearly 60 cents in just a month. Why the prespring spike and could this hurt the overall economy . Boone pickens joins us for the hour. Plus jobs in america. Ford moving some engine production back to the states. The companys president of the americas joins us first on cnbc to discuss the move and what it means for the automaker. The second hour of squawk box starts right now. Welcome back to squawk box this morning, im Andrew Ross Sorkin along with joe kernen and becky quick. See how the markets setting itself up this a. M. We also have some news walmart is 1. 67 a share, versus expectations of 1. 57 for the full year the Company Earned 5. 02 and that is ten cents above where the street was because of the beat, the ten cent beat on the Fourth Quarter. Receive knew was 127. 92, thats a little shy of the 128. 769 that was expected. We were just talking about what a cool, fullyear number walmart has in revenue. Almost half a trillion dollars. 470 or so billion and change. And you break out all the other things. The company sees fiscal 2014 net at 5. 20 to 5. 40. And that is versus a 5. 37 estimate. So thats the high end of where it was. First quarter the company sees, because this was the fiscal fourth, so for the First Quarter of next year, company sees 1. 11 to 1. 16 which is below the 1. 18 that were currently seeing on first call. So the first the First Quarter estimate is slightly lower than where we what was expected. And revenue view of 4. 96 up 0. 2 for next year. I dont know how that compares to where the street is but its a pretty big move from where it was this year at 4. 69 all the way up to 4. 96. The stock at this point is hard to say where its going to trade. 68. 65 is the bid. 69. 80 is the ask, with 69. 21. That is the thats where its trading up 5 cents. It closed at 69. 21. So i would say anyone that expected to see good you know what . This is christmas. This goes january back it shows january, december and november. Out from walmart supposedly internally, drop for february. This does not include february sales. Let me tell you about what mike did, the Walmart Stores says, walmart topped off a really good year with a solid Fourth Quarter and im proud of what we accomplished as a team every day and our associates around the world. They added 22 billion in sales and say walmart u. S. Was a key driver. Now, i dont see many comments i want to see High Expectations for 2014 and im optimistic as we look ahead. I want to see a domestic samestore Sales Outlook for the First Quarter. I dont know looking ride now. Guidance, okay i mean we saw the 1. 11, 1. 16. We know that there are challenges ahead but we believe our strong sfngsal position blah blah blah will continue to produce strong sales and returns for our shareholders. I dont see a samestore sales number. Those can even come out on the call. Or wherever and people are going to be watching those very closely. Dana might know. Sales reviewing guidance these charts are hard to read. This is so fresh i bet you dana telsey even says um this time instead of never saying ah or um. Were going to rattle here. Ceo and chief research officer, and dana, the big question is, what do we know about walmart, including is there anything that you can glean from this that tells us anything about what happened in february . I dont think you can glean anything from february. But certainly the 1. 3 u. S. Comp for the Fourth Quarter, the guidance was 1 to 3 and so it definitely at the low end. People are going to want to hear about the payroll tax increase and what theyre seeing for traffic. The First Quarter number also coming in a touch light in terms of the guidance. You have to assume some of that is coming from sales that are a touch weaker. Certainly what were seeing is theres a ton of calendar shifts in 2013. The earlier easter, the earlier mothers day. Retailers planning, thats tough to do. But what were seeing so far is, the Fourth Quarter number was better, and the low comp and also the guidance for the low First Quarter, the consumers a touch weaker. Wait a second, let me get to this. There is some guidance in here. There is some guidance that says we see Underlying Health for the walmart u. S. Business is sound and sales trends are similar to what weve demonstrated in the last few quarters. However, february sales started slower than planned, due in large part to the delay in income tax refunds. We began seeing increased tax refund check activity late last week in our stores. Resulting in a more normalized weekly sales pattern for the first time for the first time of this year. Due to the slower sales rate in the first few weeks of this years First Quarter we are forecasting comp sales for the 13week period from january 26 to april 26 of this year to be around flat. What does that tell you . That was the expectation was the comp was going to be a touch over 1 or so. Okay. So definitely a touch lower. I see what youre seeing in the press release, too, because it relates to sams also where the same recent traffic patterns of the business members indicate theyre more deliberate in spending. So that will be the theme probably on the Conference Call, deliberate spending, and how do you manage margins around deliberate spending. Okay. They also say in the sams club they say that additionally, like walmart u. S. , our advantage members are pressured by higher payroll income taxes, ongoing unemployment, and higher gas prices. So, all of those things factors in. I guess, dana, when you add up what theyve just said about how it was a very slow start but part of that was because of a delay in income tax returns and things have come back to normal but you still have all these other headwinds do you kind of let it all wash itself out . Or how do you i mean is this a oneoff thing because the the delay in income tax refunds or is this a bigger problem because of all those other headwinds . I think the other headwinds certainly for the lower income consumer suggest a bit more pressure. Weve been seeing it in the results from the restaurants where traffic has also been weak. You have more challenging comparisons in the first half of the year. Than what you have in the second half of the year. You think about walmart, theyre up against overall 3 comp in the First Quarter. A 2. 5 comp in the second quarter. And then you go to below 2 . So to make the first half tougher than the second half of the year. You know, no one expects you to call stocks on a daily basis, dana. But, the stock already came down in the last three weeks, because the word was out on this stuff. Is this sufficiently bad to make it go down further or does it just confirm what we already knew . Now the stock is down 11 cents after being up 20 cents or 30 cents. That doesnt look like a real big reaction. Doesnt look like theres anything that thats earth shattering. I think exactly what you said. The big news came out last week on friday. This space is a confirmation and now the settling down of the estimates, people look at the valuation and say, what do we see for 2014 . Dana, whats the target our target on the stock overall, around 80. 80. So we still have some room. She made it, too. You didnt say um. But shes on the phone. She might have a big script in front of her. The release just came out. Maybe youre reading from i want to know from dana, does the 80 target, is that in part the fed push . If the fed disappears does that matter to you . Doesnt matter as much because i have all the other influences of whats happening at walmart. Okay. The thing, dana, that we forget, a 1 difference on 128 billion. That matters, doesnt it . I think it does, definitely. When you do the math, its like wait a second. Over a billion bucks. Thats a thousand million dollars. Yeah. All right. Dana, thank you. You are excellent, as always. Thank you so much. Talk about some of the other Morning Headlines this morning. Were getting some more details on the class action suit that has been filed by carnival triumph passengers. The lawsuit says that carnival should be held liable for physical and emotional anguish, as well as punitive damages. An engine room fire left the ship out of electricity and adequate sanitation for five days. Boy we talked about some of the things that some of those passengers are saying was going on on that boat. And we havent mentioned it since. And cnn, i guess, went wild on it. Ape. Went ape on it, a nonstory. No one even really basically hurt, much less dead, but it paid off in the, you know, in the ratings. Yep. Do what you got to do. Also in the news, google planning to sell the first Laptop Computers powered by its chrome operating system later this year. Thats according to the wall street journal. Which points out that the chrome computers will compete with devices powered by googles android operating system. So that will be an interesting little competition. And a new government study showing that adults get about 11 of their daily calories from fast food. The study covered the years 2007 to 2010. Now thats down 13 from the prior study which covered 2003 to 2006. So does that mean, joe that people are spending less time means, yeah, less calories. Less calories . A little bit less calories is that that theyre eating there less frequently or theyre just choosing the salad options . Could be. I dont know. Now that theyre selling a smaller version of coke or pepsi. I dont like that study. Doesnt tell me enough. Plus the new study only went to 2010. What year is it now . 2013. Thats what i thought. All right, stocks were good. Were right. Because thats what were going to talk about right now, and it says 2013. We want to be accurate. Stocks logging the worst day in 2013 following the feds meeting minutes. As we heard minutes are different than a statement. A threeday rally produced multiyear highs but now, people are wondering can the socalled fear data, called the vix, up nearly 20 . You can see from low levels. Joining us from the cme group ben liechtenstein of traders audio dotcom. You cover a lot of Different Things, ben. Was that yesterday the the the different hawks that we heard from in the minutes, was it fundamentally different than what we had been hearing, do you think . Yeah, well, it seemed to be. I mean and certainly we saw a little bit of a different Market Reaction to it. We saw a big runup in the dollar. Its enjoying levels up above the 81 even level and sellside activity and reaction to it in thesomes nasdaq down on the russell. You mention the huge spike on the volatility which just reminded me of the joke we used to have years ago here as runners when wed get a 10 paid increase if you will. Well always joke and say 10 or 20 of zero is still zero. So with volatility with that vix trading right around that 12 level we did see a bit of a spike. But still, again, it levels much lower than wed like to see them. Ranges have been still really tight. Participation has been somewhat limited. But, the 14,000 level finally gave way again to the downside right now. But, really, what were watching is this correlation between the dollar. And weve been watching Dollar Strength amid stock strength recently. If you look back in december, we saw s ps trading right around 1400. Dollar trading around 80 even. Here we are now in the 1500 level. We got the dollar up above 81. So were seeing, again, that correlation that were used to seeing that inverse correlation kind of breaking down. Yesterday, although there was energy to the downside, and keep in mind it wasnt necessarily only due to the minutes because it actually started on the opening bell, we opened right around 1527 in the s ps and sold off into the close but definitely momentum and energy bit after the minutes. But really, joe, what was most impressive yesterday is that we saw multiple major markets, the four majors that we watched, s p, nasdaq, dow and the russell all posting lower lows, and lower highs. Again weve been seeing such divergent type activity thats really in my opinion where the volatility and where the energys gone. Is you have nasdaq in positive territory, the russell, s p and dow in negative territory. That doesnt create a very energetic or active trading environment. And thats what was different about yesterdays selloff. We saw sellside activity across the board in all the majors. And gold, i dont know. Gold is gold, as well with the crude. Gold is pretty but crude. Well, that doesnt there was rumor of a Circuit Breaker that came in because of i think it was 2500 contracts traded within ten seconds, and so there was and the rumor actually was that it stopped a large order that was supposed to be coming in right behind that. So, again, Circuit Breaker activity, and that was in reaction to rumor of a large fund blowing up and having to liquidate position which i dont really understand. I was thinking about it and i was like if the fund blew up and they had to liquidate position that would mean they were long crude liquidating and selling crude. If they were long crude why would they be blowing up because crude recently came off that high . Obviously they could have other positions on, so on and so forth. But again, yes. For the record i dont see the sell side activity in the gold here. Nothing major yet, if you will. Until we breach that 1500 level, at least. All right. All right, ben, thanks. Thank you. See you later. Still to come this morning, fords plan to bring jobs back to america. The company kicking off an initiative today at its engine plant in cleveland. Phil lebeau brings us a special interview with fords president of the americas as squawk box continues. Up next, Boone Pickens. Why the u. S. Needs a new strategy for the Strategic Petroleum reserve. And his plan to make us more energy independent. He joins us for the remainder of the hour when squawk box returns. Welcome back to squawk. Were watching shares of walmart. The retailer just reporting Fourth Quarter earnings of 1. 67 a share. Its a ten cent beat. Revenues falling short of estimates, though. Samestore sales also missing the mark, and fullyear guidance brackets the current consensus. Walmarts Current Quarter view does fall short of analysts estimates and the retailer is raising its annual dividend by 18 to 1. 88 a share. Walmart says customers are challenged by higher fuel prices, increased payroll taxes and delayed tax refunds. And you can see that stock is down slightly at this moment. We did have a little bit of a preview in that leaked memo about februarys february sales earlier and if youre looking the interesting thing here if youre looking for what really matters, probably what investors are keying in on is what theyre saying about the february sales. That was what that leaked memo talked about. They said that they started slower than planned due in large part to the delay of income tax refunds but they began seeing increased tax refund check activity late last week resulting in a more normalized weekly sales pattern for this time of the year. But then they also went on to talk about how theyre members are seeing things like pressure by higher payroll income taxes, ongoing unemployment, and higher gas prices. So you have to figure out how much of this was a temporary thing because of the delayed income taxes and how much of this is a continuing issue of those head winds that dont seem to be going away. Thats whats playing out in the stock and well continue to watch this. Also that dramatic move in gasoline prices thats been a big issue for walmart shoppers and for just about everyone in the nation. It is putting a spot light on oil and the rest of the energy sector. Its a perfect time to talk about production levels in the nations dependence on foreign oil. Our guest host for the next hour is Boone Pickens. He is the founder of bp capital and boone, we talked to you an awful lot over the last four or five years about the missions dependence on foreign oil. What we have not spent as much time talking to you about is where things stand right now in terms of what were developing. What were producing here in the United States. Why dont you give a little insight as to what you thinks happening right now in terms of production with natural gas and beyond . Well, you increased Oil Production by about 2 Million Barrels the last three years. Which is incredible. And ive said i was a guy that said so you remember. So you dont confront me with it. I was the guy that was chanting free oil three or four years ago. The prediction has been popped. It never happened. We never believed. But who do you give credit to for that . You give it to the oil and gas industry in the United States. In spite of the government. In spite of the government. As the oil and gas industry has done a know, theres over 5n wells drilled in the world today in all the wells that have been drilled. Over half of them have been drilled in the United States and we have more gas reserves than any other country in the world. And we dont even we dont even promote the use of our own clean burning fuel. But, youve also increased Oil Production. Its just been a magnificent record of achievement. Hired the people, made the money, paid the taxes, helped the economy, the whole thing. And nobody walks in there, pats them on the back and says good job. We were just talking off camera. We should have party favors, hats. We should be running around dancing because the future of our economy here, our manufacturing economy, is as bright as any country in the world because we could have the lowest input cost in terms of energy. We could lead the world again in a lot of different areas. You could take off right now on the back of cheap energy. Our labor you know, we can even pay our people more than we pay them over there and still make more money in thats right. We could. Because the energy is so cheap. Cheapest energy in the world. 20 cheaper on oil. 75 cheaper on natural gas. And 50 cheaper on gasoline. And boone is thinking even further. How do you cut the defense bull . You pull the fleet out of we dont have to protect the persian gulf anymore. We dont even need them. So you pull all that out. How much money do you save on that, andrew . You want to cut the defense budget. Theres a huge Foreign Policy issue that happens if you can really get price down. Price is already down. Part of it is you can bankrupt russia and do some crazy aircraft carriers. The only way you can get prices down, say okay we got all this oil, why didnt the price come down . No, youre still guided by the cartel. Youre still opec sets the price. They make it real clear to you. The minister of energy in saudi arabia says we have to have 100, 115 a barrel. Listen to him. Listen to them because they will cut supply. So whats happened in saudi in the last four months. Theyve come down from 9. 9 Million Barrels a day to 9. 1. Opec is down from 32 to 30 Million Barrels. Although, boone, how much do you think the Federal Reserve is actually playing a role in this . Because yesterday when the Federal Reserve when we got the minutes and it sounded like there was some dissent and maybe people dont want to continue quantitative easing indefinitely, thats when we saw the biggest drop in oil prices that weve seen in months. So a lot of that loose money, that free money youre down again this morning. Yeah. But i mean that is a fed reaction. Not an opec reaction. Oh, i know. The fed doesnt have anything to do with the price of gasoline. But here the only way youre going to bring gasoline prices down is introduce another fuel. Because opec will keep dropping supply to keep the price up above 100 a barrel. Tear good at it. Watch what their production is, production going down, theyll hold the price up. Theyre not trying to gouge you. They just have social costs that they have to pay for to stay in power. And so if you want to bring a gasoline price down, to introduce natural gas into the mix. Where are you on keystone . On keystone right now . Duh. I know where he is but i i think i know. Maybe hes got a different view these days. I dont think you should bring keystone in at all. I think you turn it around and go west with it, take it to the chinese and really help them. Okay. Nuts i mean here you have for a second there, what is he talking about. Thats what all your friends tell you we should do. Here you have it coming in and the most amusing part, they didnt want it to cross nebraska because of now they voted 441 in nebraska to have it cross. Nebraska just has 51 pipelines across it. Its not like its something they havent ever seen before. All right. Were going to continue this. This is great, boone. Coming up, fords plan to bring jobs back in the United States. And if you missed it, last night, nadder tharpe hitting a short jumper in the lane with just 15. 5 seconds left in overtime. Double overtime to lift the kansas jayhawks over oklahoma state. Over number oh. What are you laughing about . Over number four because i did this for you. Double overtime you lost by one point. You lost by one point last night. We beat them by five at orange how long ago was that . Its been weeks ago. The game has major implications he has an orange tie on. For the big twelve championship and the jayhawks did get revenge after the cow boys ended their 33game winning streak earlier this month. Squawk youre welcome squawk box will be back after this. The patient, presented with a hairline fracture to the mandible and contusions to the metacarpus. What do you see . Um, i see a duck. Be more specific. I see the aflac duck. I see the aflac duck out of work and not making any money. I see him moving in with his parents and selling bootleg dvds out of the back of a van. Dude, thats your life. Remember, aflac will give him cash to help cover his rent, car payments and keep everything as normal as possible. I see lunch. [ monitor beeping ] lets move on. [ male announcer ] find out what a hospital stay could really cost you at aflac. Com. But at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. 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Tdd 18003452550 call 18665160492 tdd 18003452550 and a trading specialist tdd 18003452550 will help you get started today. Welcome back to squawk box. In our headlines this morning, dow component walmart reportedly out with reported quarterly profit of 1. 67 a share. Ten cents better than expected. It also raised its dividend 18 . However its Current Quarter outlook for both samestore sales and earnings is below what analysts had been expecting. But that stock at least at this point is indicated higher and well continue to watch it because the trade has been all over the place. Plus, its the busiest day of the week for economic numbers. In about an hour well be getting the weekly report on initial jobless claims. Also the january Consumer Price index. Then coming up at 10 00 eastern time well see existing home sales for january. The index of leading economic indicators. And the philly fed survey. Private equity firm fortsmann little is putting img up for sale. The decision to sell was made by the trustee who runs the estate of teddy fortsmann who died back in 2011. Courtney reagan is here and has more of the story. This is a biggie. They have this prerecorded Conference Call but you can kind of scan through the transcript a lot faster. Its 40 pages. Theres some interesting nuggets in here. I just spoke with walmart, too. For the first time at least in awhile walmart broke down the Holiday Quarter as far as sales. They said that november started out really good. They had a record black friday and a number of categories. And then the first three weeks of december were really soft. Thats what we all thought but we werent totally sure. Christmas week double digit comps. The beginning of january was good and then it fell off again. Thats an interesting sales trend, and sort of speaks to what we were thinking. The consumer really driven by those events, black friday, and the desperation when christmas comes and you dont have the gifts that you need. Then also they did give, when we look at february, and this is key, they did say, quote, due to slower sales rate in the first few weeks of the First Quarter were forecasting those comp sales to be flat. And that february started slower than normal in large part to the delay in income tax refunds. So they did actually provide a little bit more color and i think this is in response to those leaked emails. So it does seem that this, at least jives with sentiment, versus not the word disastrous in here anymore. But as a result of that i think thats pretty interesting. Layaway up 10 for the season. So maybe its good they leaked i mean are they were not surprised now. I dont think they did it on purpose. As a result theres nothing worse than what we were already worried about. Although they did admit that things like higher gas prices are still weighing on consumers. Weve seen that so many times. Gas prices, inflation and the payroll tax increase are three things specifically mentioned. When you say gas price you are talking about gasoline. Gasoline. Right, not natural gas. All right. So, again, were probably going to hear a little bit more over the course of the day. I think so, too. There are no updates to the investigations, we dont have a time line for when well get results from that. I asked walmart specifically. They said there are no updates as far as any of that. The yeah. We were already talking about that. This is a quarter where we could use some decent results from some of those developing markets. Maybe youll change your tune now, mr. Goody two shoes. Moral high ground. Thanks, courtney. Ford is making another big bet on the success of its ecoboost engines. This time, its in cleveland, where phil lebeau joins us with another story about this and another first on cnbc interview. Take it away, phil. Joe, thank you very much. I want to bring in joe henriks who is the president of the americas for ford. He joins us from fords cleveland engine plant, where the company is announcing, what, joe youre adding 450 jobs . 200 Million Investment as you increase ecoboost engine production . Thats right, phil. Good morning. Were very excited to be here in cleveland because were bringing production of the two liter ecoboost engine to the United States from spain where we currently produce it and bringing jobs here back to america, based on great demand for our ecoboost engines. Joe, how much of this is a play on whats happening with the euro and the expense of producing this engine over in valencia, spain, at your plant there, and the demand here in the u. S. . Its really all about demand, phil. Were maxed out with our production on the two liter ecoboost because of the demand were seeing in products like the new fusion and escape so were going to bring production here to add capacity globally and produce it right here in the United States. So youre doing this at a time when you saw the report from consumer reports, and i know that some of the alarms are going off there in the background, you are at an engine plant after all, but you have heard the reports from consumer reports, the criticism that ecoboost engines, and really all turbo charged engines, do not deliver the performance, nor the fuel economy, that you and other automakers are advertising. What do you say to that criticism . Well, phil, were not that data is not consistent with what were seeing internally and externally in the marketplace. The demand for ecoboost continues to rise. Its exceeding our expectations and even surveys from j. D. Powers say customers are more satisfied when they have ecoboost engines in their vehicles. Again, the Consumers Want more engines. This year were going to do over 500,000 ecoboost engines right here in the u. S. Joe, youre riding a bull right now for ford because you guys are in the midst of a huge surge in new vehicle launches. And frankly, the last couple have not gone well for you when you guys take a look at the problems youre having with the lincoln mkz. Dealers complaining that theyre not getting these vehicles quick enough. I know you want to make sure you have the quality right before you increase supply and then you had the problems with the escape and the recalls last year. How confident are you that you guys are able to scale up this production, and these vehicle launches, and the increased engine production, and still maintain quality . It is an exciting time of growth, phil. Youre right. Theres a lot of demand in the marketplace. And so as we grow, were going back and flexing those muscles again that we havent used in many years to grow the business. Quality is our first and most priority for all of our vehicles. On the mkz launch we shipped over 1,000 vehicles, arrived at dealer show rooms now. Were very excited about the product. We wanted to take the time to get that product right as we transform the lincoln brand. And with our other launches, escape and fusion, sales were records in january and we have great sales in february on those products, as well. So the consumers are responding to our great new products. Joe hinriches, the president from Ford Motor Company from clevelands engine plant. There you have it, guys, once wean were seeing the Auto Industry expanding again, adding 450 jobs. Were going to see more of this in the next couple of weeks as other automakers continue their expansion, as well. Theyve got to increase production, and increase meeting that supply to the demand. All right, phil. Thank you. We jumped every time he said joe back here. Because we said oh because, right, right . I did it, too. Coming up, more, much more from Boone Pickens, and then on squawk on the street this morning, dont miss new yorks deputy mayor talking about the push for electric vehicle charging stations. And as we head to break, check out the price of gasoline this morning, and another recap of that big kansas win last night over oklahoma state. Squawk is coming right back. Coming up, pain in the gas. Prices at the pump soaring. And burning a hole in the consumers pocket. Find out where prices are headed. Right after the break. [ male announcer ] when you wear dentures you may not know that your mouth is under attack, from food particles and bacteria. Try fixodent. It helps create a food seal defense for a clean mouth and kills bacteria for fresh breath. Fixodent, and forget it. [ engine turns over ] [ male announcer ] we created the luxury crossover and kept turning the page, writing the next chapter for the rx and lexus. This is the pursuit of perfection. Welcome back to squawk. A live shot of times square. Some vehicles that run on gasoline, probably running through there. Were talking about gasoline prices this morning which continue to climb with peak spring and summer driving season fast approaching. Average price of gasoline is expected to reach historic highs across the country. But will the sticker shock be too much for consumers to handle . Joining us now to talk more about rising gas prices, Vice President of Government Relations and director of motor fuels at the National Association of Convenience Stores which represents three quarters of all gasoline sold in the u. S. , and our guest host this hour, Boone Pickens. Good morning to you. Good morning, guys. So what are we expecting . Give us sort of a prediction on prices as we head into the Spring Summer period. Well, since i represent the Retail Market i cant really predict prices. What i can say is this is a tough time of the year. Every year we see problems as we go into the summer drive season. If you look historic numbers since 2000, between february and sometime around memorial day, Retail Prices have been going up around 25 , 26 , every year during this time period in the year. We have Boone Pickens here on the set. Big fan of natural gas. I think you had a question. Well, john, you see gasoline price going up. I know you say you couldnt predict. But historically they have gone up, summer driving season. Yeah. Thats correct, isnt it . Thats correct. The only way we can get gasoline prices down is to introduce another fuel into the mix. Which would be natural gas, of course. Do you have a response on that . Natural gas has got the attention of a lot of my members. Theyre looking at it. Some of them are investing in the infrastructure. And the reason natural gas is so attractive is because of the price point. As you know you can find natural gas at retail for maybe half the price of gasoline. Thats an attractive price point. The challenge we have the limited number of vehicles that can run on natural gas. And for a retailer to do natural gas appropriately, to actually provide customers with reliable stream of product, its about 1 million to 1. 5 million per location. Until theres a demand level a lot of retailers are reluctant to invest that kind of money in a product that right now is providing great return on investment, but you have to sell units in order to get that return. I agree with your million, million and a half unit. You cant put those stations in without customers. Right. Its where you are. So its chicken egg. Right. But i have people say to me, say, the government should do the infrastructure. Please, do not ever introduce any infrastructure to the government. So whats the answer, boone . Whats the answer to make it worth his while and his members while to put natural gas in . The price will take care of that. The price will do it. And natural gas is so much cheaper. Youre talking about 2 a gallon cheaper. Well if you go back to trucks. Start with trucks, because thats where thats where it will all be the problem will be solved. Because of volume. Those trucks are running 20,000, 30,000 gallons a year. Youve got 5 million to 8 million trucks. Okay, that is half its going over to trucks right now. But you can put the infrastructure in. Already pilot, and Clean Energy Fuels has put 75 stations on the interstate for l g for the trucks. So it can be done without a subsidy. You can do it without a subsidy. But dont say subsidy. Because when we provided this in the natural gas act, it had a pay for. The payfor very simply is user pay. No different than the toll road. And you can its easy to do. But we had to vote to put the natural gas act on the transportation bill. Can you imagine, germane or not germane not germane to put the trucks on the transportation bill, youve got to be cue cue. Theyre cook cue. They voted nongermane so now youve got to have 60 votes. We got 54 and three of them no, no. But fisheries in alaska were gentlemen main to sandy relief. Right. John, we just had phil lebeau do a drive with a tesla along the east coast corridor, and he had to stop i think how many times did he have to stop . Twice to recharge. He had to charge for an hour. Do you have any expectation that your members are going to get behind electric cars in a real way any time soon . Its going to take some further breakthrough. I think the models has done a great job in terms of demonstrating a battery can get 200, 300 miles per range and get a pretty fast recharge. 30 minute gets 50 recharge in the teslas. But 30 minutes is still quite a bit of time to be spending in a convenience store. Now if we cant find breakthroughs in the technology to bring that charge time down to 5 to 10 minutes with a meaningful distance through that charge time, then more retailers start looking at it. Because our guys are putting in restaurants, theyre putting in fast food. Theyre putting in sandwich shops. And if we can encourage our customers to come to our stores to recharge their vehicles, buy a sandwich while theyre waiting for their car to charge, thats a Business Model that might work. But weve got a few breakthroughs in technology whats the cost . If nat gas is 1. 5 million a station, whats electric . Electrics not that much. Much cheaper . If you have the conduit out to the parking spot where you want to put the charger, you could put a charger in for under 10,000. John, were going to leave it there. Thank you for joining us this morning. Thanks, guys. Up next our guest host Boone Pickens and new york city mayor likele moomberg are going to be announcing a new plan later this morning but we will get the details next right here on squawk. Also at the top of the hour, its all about the markets. After yesterdays selloff, could investors expect more of the same . Howard ward will tell us where to make money right now. First, though, as we head to a break, check out shares of berry petroleum. Lin energy is buying the company for about 46. 24 a share. Thats a 20 premium to yesterdays closing price. And find squawk box online, on mobile as well. You can follow us on twitter squawkcnbc. Like us on facebook and visit our show page squawk. Cnbc. Com. Revolutionizing an industry can be a tough act to follow, but at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. Helping thousands of companies simplify how work gets done. Hows that for an encore . With xerox, youre ready for real busine welcome back to squawk. Our guest host for the last hour has been Boone Pickens. Founder of bp capital. I has some other business in the city today which we want to talk to you about. Going to see the mayor, i understand. Thats right. What are you doing with the mayor . We got natural gas going into an announcement. Yeah, its a big deal. Going into pizza trucks. Yeah. What does that mean . It means good. Good for america. What kind of pizza . All pizza trucks . I think theyre all barbecue chicken pizza. I dont know what kind of pizza they are i dont eat pizza its the food truck. There are a lot of food trucks in new york city. Your point is if you can get this fleet like some of the others, businesses and other things, that this is a big winner. If the natural gas ever succeeds as a fuel youve got to keep picking off another one, another one, until it adds up to something. Unless you go for the truck. Now please listen to me. You can knock out opec by just taking the diesel trucks, 18 wheelers, to natural gas. You can take opec out. Its that easy. 4. 5 years weve been talking about this. Youve been wrangling with washington, and its been i lost. Its been crazy watching that back and forth. You lost but you have 51 i lost. Yeah i got out of 100. Can you believe it, i got 51 votes, 45 democrats and 6 republicans. Ive been a republican since i was 6 years old. I get six votes. You attach it to some weird there was no taxes on it. It had a payfor. No, no, you attached it to a bill. Trying to attach it to the transportation bill. How foolish of me. I told you what youre partnering with government. Did you think about that . Trying to get the government to help you . All along i told you that. That its going to have to be the private sector. All along youve been right. I know. Hold on, hes with the mayor today in some ways. No, but who runs the fleet . I dont know. You take help wherever you get it. Does he talk down to you, bloomberg, because he has more money than you . Do you refer talk to anyone else that has more money than you . Thats rare, isnt it . What is that like . Oh, its not rare. Its pretty rare. Youre used to talking to people like me and andrew and becky. Hes probably he lapped you a few times. Does that bother you . Bloomberg . Yeah. Lapped me a few times. Got 20 billion yeah, id say 20 times. Get it in proper perspective. No, hes got more money than he can count. He does. He does. I agree. Exactly. Hes bigtime. But, no but lets talk serious about our country. You got to get the country on our own resources. Then the economy recovers. Right. Its that simple. But you said that on the opening remarks. And what will do it will be money flows doun downhill if you let the private sector work, it will go to where it needs to go eventually because people will have a profit incentive. Get these, senators say to me. I say, look, get on natural gas off opec oil. They said youre trying to make me pick winners. I said no, no, wait a minute. Its one or the other. If you dont pick anything you get the other. But theyre fully ready to pick wind and solar and things that are never going to be economically, you know its ridiculous. Is solar ever going to be economic . Not with natural gas with natural gas where it is its going to be tough. The thing about it is youre sitting here with a birds nest on the ground. And what are you doing . You dont even see the bird nest. It was i mean its its so sad. But it takes awhile to build that infrastructure for all these things. Weve watched Natural Gas Prices sit at these incredibly low levels. You would expect more and more money be put into infrastructure so that it gets siphoned off to be used at utilities and other places. Youre calling it like its happening. Its going to that. But slow that. I can tell you the truckers are going to do it. If im a trucker sitting here on fuel thats 2 more expensive than yours, you will win. But why have we not seen that happen . We are seeing it. We are. Not as fast as youd think. Why not . Because without the government you cant just do it without there is a government. No, it will happen they want it to happen fast. But if you go back to when we switched from gasoline to diesel, that was 72. And that took about five or six years to accomplish. That was all on were coming up on five or six years of low prices. I know but dont start on the day i showed up here trying to talk about this subject. Dont say thats we cant get gasoline stations to put in a generator because its 12,000. To do the natural gas, he said it was a million dollars. But theyre going in. I mean, they arent going to go in for your car. Thats he doesnt have a car. He has a motorcycle. He doesnt have anything. He has a driver. Oh. Ive heard of those. You and the mayor. Exactly. Yeah. Exactly. Im more fit in the role of driver. You are. Okay. Weve got to thank Boone Pickens. This has been a great hour. A lot of fun. Come on back. Okay. Do it again. You never give me enough time. The first couple of brackets im going to go with oklahoma state. I think theyre good. Thanks, i appreciate it. Then ill pass that back to stillwater. Let them know. Because they watch you every time you come on. No kidding . Yeah, sure. Because beckys from oklahoma. All right. Thank you. I knew when we come back, walmart in focus this morning after reporting results earlier today. Were going to take a closer look at the numbers and the outlook just ahead and you can see in the premarket that stock is trading higher after trading lower through much of the day. Walmart is up about 29 cents. Plus a special whats working now segment high end retailers versus low end retailers. Which are a buy and which should you leave on the shelf . And if you missed it last night oh, no, im not reading this. Oh, no. Boone i didnt do this. This is all a very close onepoint gain. Double overtime. Squawk will be right back. Boone i love you even if joe i love him. Is a pain. Why turbo . Trust us. Its just better to be in front. The sonata turbo. From hyundai. Walmart out with numbers. 1. 67 a share versus expectations of 1. 57 for the full year. The Company Earned 5. 02. Well tell you what the retail giant is saying about the health of the consumer. I love the smell of commerce in the morning. Plus were going to dig through walmarts report with an analyst who covers the stock. And breaking data on employment and inflation. Hello jobless claims and cpi hit the tape at 8 30 eastern. The third hour of squawk box begins right now. Wow. Just figured that out. Welcome back to squawk box here on cnbc. First in business worldwide. Im joe kernen. Along with becky quick, and there she is. Coming back. And Andrew Ross Sorkin. Checking the markets this morning, u. S. Equity futures after yesterdays late selling are down again this morning. But not down as much as they were when we first started the show. Down over 50, they were at release of the fomc minutes yesterday cost a pall on people that were long and they thought oh, my god can we not count on these guys . But then again weve heard it with just the minutes. It wasnt a statement. The s p and nasdaq turning in their worst sessions of 2013 on the heaviest Trading Volume of the year. And the vix which is a measure of investor angst and worry was up 20 . It had its biggest daily gain since november of 2011. Much more on the markets still ahead. But first becky has your Morning Headlines from a location where there will be much more interesting. Im over here. Im over here. Check out the stairs. Dow component walmart reporting quarterly profit of 1. 67 a share. Ten cents above estimates. The company also raised its dividend 18 . However, the outlook for the Current Quarter in both samestore sales and earnings is below what analysts had been forecasting. Well have more on walmarts results in just a minute, and there is a lot to dig through there. Pretty interesting stuff. But at least at this point dow component is trading higher. Up about 20 cents. Among the other stories that were following, boeing is expected to meet with the faa tomorrow, and launch a formal plan to get its grounded 787s back into service. The company will propose a redesign of the dreamliners batteries. It will be interesting to see where that dow component is trading today, as well. Right now down by 12 cents in the premarket 76. 66. Officials do say that the jets could be back in the air within two months. Also google is planning to sell the first Laptop Computers powered by its chrome operating system later this year. Thats according to the wall street journal, which points out that the chrome computers will compete with devices powered by googles android operating system. Joe, ill send it back over to you. Thank you. Beck, consumers are battling higher payroll taxes and oil prices. Can the lackluster Economy Economic recovery survive a dip in Consumer Spending . Our guest host for the next hour, howard ward, chief Investment Officer for Growth Equities at gamco. And its howard ward ward. Ward ward. And sarah malik is easy to say. Im all confused with howard ward. Welcome to you both. Thank you. Got to talk about with you sarah for starters, and that is, i want to hear about your view on where we are with the economy, and especially with the consumer, and then also that with reference to what the fed said yesterday, and whether it all makes sense, and whether we need to reevaluate. Well the consumer is really a tale of two halves right now. Theyre being hit on one end by higher taxes and deferred tax refunds. But on the other hand we have strong housing, and relatively strong labor thats helping the consumer out. So when were looking at the consumer right now were interested in companies that can do well in any kind of environment. Companies with strong Free Cash Flow and Profit Growth. One of those is starbucks. Theres a scarcity of large cap Consumer Companies right now which can grow at over 20 . Starbucks is one of those. They have high samestore sales at 7 . We like their china Growth Strategy where they can grow units at 30 per year with double digit growth. They have the tailwind from coffee deflation which will help their margins grow by 100 basis points and we like their Channel Development strategy with the tazo t kcups. Thats the kind of investment you want to be in right now. Theyre not quite like a coach versus a Dollar General. Starbucks doesnt necessarily get hurt by the low end, because if youre in their spending 3 and if youre spending 3 anyway, those arent people that are going, you know, so they might not be heard if the low end is hurt by the payroll tax or Something Like that. Correct. Okay, figured that out. You like starbucks, too . Yeah. A lot of starbucks and this International Story with starbucks is very exciting because its not just china which will be the second largest market in the world next year. About 1,000 stores, its japan. Entering vietnam. Entering india. Africa. Europe. Its a real global push, and theres still ongoing expansion here in the United States. Its not saturated in the United States yet. So very optimistic on starbucks. You know, its a 12 top line goal right now, 20 bottom line. Its going to be that way, as well. Howard schultz is doing a fabulous job. Coming back and doing that. I thought they had lost their way a little bit. They were trying, i dont know, they were changing, and they were doing this other stuff. Since a starbucks office or Dunkin Donuts . Im a dunkin guy. You just lost me. In the meantime can we talk a little bit about the fed . Yeah, these guys are ready to tell us about stocks regardless of the fed but we can. Do you care about the fed . We do care. And i mean the market right now were coming off a really strong market and reasons that could cause a pause and the fed comments from yesterday are one of those reasons. Theres other things that were watching including equity inflows. They started off the year very strong, and recently they turned negative. And were watching those. We think that those should be driven by consumer and investor confidence, and were hopeful that housing and labor should continue to keep the Consumer Confidence. But if you look at Consumer Confidence numbers, those came in under conseine us it for january. So all of these are reasons why the market may almost sounds like sarah is looking at consumer names based on whether the fed action affects the consumer. Macro, youre not as concerned about whether money stays easy, are you, howard . Is that is the fed the primary determinant of what you i think lets put a little context around what happened yesterday. Because, first thing we have to recognize is that stock went up 13 since midnovember. Right. So it was a little bit overdue for a pullback no matter what. The catalyst for that were the fed minutes. The fed minutes were not hawkish. The majority of the fed members support the current path that theyre on. A minority are questioning whether they should buy fewer bonds, 85 billion a month now, at some point over the course of this year, and you know what . Policy isnt changing any time soon. The fed is incredibly relaxed. And if the economy has healed enough that the fed can pull back a little bit and remove some of the price controls that its putting on Interest Rates, i think thats great news. And if it spooks some speculators, so what . We just heard that it wasnt the economy that improved it was that they finally took a close look at the negative effects of what they were doing in terms of bonds and creepating a bubble in the credit markets. Now theyre worried about the negative things theyre doing, not that theyre not they should worry about that. Because when you have a zero rate policy pofor this long and you claim youre going to keep it you breed speculation. Whether its ray dalio whos told us that theres going to be a real big move into equities this year. Whether its david tepper, which is dont bite the fed, are we saying that everybodys whos playing the equity market right now is speculating . No. Because a lot of people who sold yesterday as the hot money in, hot money out. Theres a lot of it that goes on every day. A lot of High Frequency trading. Its not based on longterm investing and fundamentals. I would argue that some of the investments in equities recently have been a gamble on the fed, frankly for the next two years. Or is it a recognition that Interest Rates at 2 on the tenyear treasury at 50 times a coupon, with the coupon not growing and principle not growing makes stocks at 13 times thats the argument. Okay. Stocks look extremely underpriced relative to bonds. And for the next 17 years, every single day, 10,000 baby boomers are going to retire. How are they going to fund that retirement with cash returning zero, or close to it, and with treasuries returning 2 or less, and in an environment where inflation is probably going to be close to 2 or higher . Inflation for the last 35 years averaged 3. 9 . Were at half that right now. That number could be going up. Stocks are cheap. It really is the only game in town, unless youre going to tell me that were going to have a recession and earnings are going to go down and its time to hide, go back, seek shelter is it u. S. Stocks or do you start looks elsewhere . And if the fed pulls back the punch bowl, how drastically does that change the situation . Or does it not change it at all . Youre just looking at stocks from the bottom up . Stocks around the world have been rallying for the last year. And maybe in europe even more so than the United States, considering weaker economy that they have. But the point is, that actually the economy has gotten better. Profits are right near that record level of 2011. Payrolls are growing every month. You want to own stocks for the longterm growth that youre going to have them in earnings and dividends, and the inflation protection that you get from stocks. Sarah tell us another stock you like. Another name we like and were focusing on markets where theres a lot of volatility were focusing on companies that have strong Free Cash Flow Profit Growth that have their own leverage to pull. Hertz is a name that we like. They can grow in a lot of area including off airport business, the international business. We like the dollar thefty merger. Now that theres a few top players in this market we expect to see Pricing Power to the tune of 1 to 2 . And we expect them to increase their return on Investment Capital by 200 to 300 basis points by divesting low return operations. Howard one more from you . How about several Global Consumer brands that are all cheaper than the price that Warren Buffetts paying for heinz. Hes paying 13 times ebitda for heinz. For under 13 times i will take tiffany, at 10 times, nike at 12 times and ralph lauren at 11 times. All these companies have had better revenues, better earnings, and better stock prices than heinz over the last ten years and i think they will for the next ten years. And all of these stocks have done nothing for the last 12 months. So youre not piling in to stocks that are hot, and then have had big moves. You agree with that . Instead of instead of a heinz, a tiffany . I understand catchup a lot better than the jewelry. I love the blue boxes, however. But a lot of people get the box, right, andrew . The blue bag what are you saying . You know where to go in the jewelry. You might use a blue box with something you got i would do it, right . Dont people do that . Something from kay . Joe, let me say this. I know what hes saying. Hes suggesting got to reuse the box. Got to reuse the box. Come on. Broadest measure of the stock market, it was at a new alltime high this week. Luxury spending is going to be helped by the wealth impact by the wealth impact of higher stock prices. Wow. Yeah. Its going to happen. Want to go where the hockey puck is going to go wayne gretzky, the great one. When it comes right down to it, if youre going to talk to your broker about buying something you cant just say, you know, either buy the fed or short. You got to come up with a name that you like. You change your mind hour to hour today. I do. I think the consensus on the set now is that we shouldnt really worry about what happened yesterday. Did you know, did you see that his name is howard ward. And then if greg ip if you reverse his name its greg pi. Howard and sarah will be with us for the rest of the hour. Word no. No thats backwards. Were watching shares of walmart after the company reporting earnings above analyst expectations. But outlook for the Current Quarter fell short of the streets forecast. We got more on the companys quarter coming up next. Talk to an analyst who covers the stock. Take a look at futures ahead of the 8 30 econ data. Were going to be waiting for jobless claims and cpi. We have red arrows. Well see whether that turns around. Still ahead on squawk box a special retail edition of our whats working series. Winners and losers. Luxury versus discount. And new trends in Consumer Spending. Thats coming up at 8 40. [ male announcer ] with citibank its easy for jay to deposit checks from anywhere. [ wind howling ] easier than actually going to the bank. Mobile check deposit. Easier banking. Standard at citibank. Makes it easy for anne to manage her finances when shes on the go. Even when shes not going anywhere. Citibank for ipad. Easier banking. Standard at citibank. Walmart out with Fourth Quarter results earlier this morning. Joining us with reaction is jpmorgan hardlines retail analyst. Also cnbcs retail reporter courtney reagan. Why dont you set the scene for us a little bit with the important things coming out affecting the stock today. Right. So first of all, bottom line beat, walmart reported 1. 67 ernst per share. Thats ten cents higher. However net interest was lower and so was the effective tax rate. That does make a difference when you talk about the quality of the beat. Revenues also came in a little light in those key u. S. Samestore sales were lower than hoped for at that lower end of the guidance range. Walmart had said 1 to 3 . They came in at 1. . What concerns me a little bit about that is if you look at the trend over the year, u. S. Samestore sales trend has started to fall down starting up 2. 6 , then up 2. 2, up 1. 5, up. 1. Traffic also negative in u. S. For the Fourth Quarter. Chris originally that stock was trading below. This morning its turned around a little bit up by about 77 cents right now. What are some of the key metrics as you dig through this that really maybe took a little longer to get to . I think thats an important comment. If you back out those onetime items youre talking about 1. 54, it was at 1. 57. That deceleration, traffic turning negative for the first time in five quarters, theyre saying in the First Quarter with guidance 5 below the street and lower the outlook for the year. I think the saving grace in the stock reaction is they did take the dividend up 18 . Thats about a 2. 7 yield on yesterdays close. I think the fundamentals are concerning the turnarounds behind them and the low end consumer faces significant pressures with the payroll tax and gas prices that are up 10 in the last four weeks. The other thing is what is happening lately. Thats probably the most important thing to happen out with february. We heard about that leaked memo last week all the concerns for the beginning of february. Are you satisfied that this was kind of a one off and maybe the trend is im3r06ing . I dont. I know in the release they talk about hey, as of the end of last week we started to see more normalized trends. If you look at what happened over the past year, a year ago you had record warmth. The consumer went out and spent above what wage growth was in the First Quarter of 2012. The low end consumer in particular. Now you face those really difficult comparisons that payroll tax increase is about 2 of income. For the average low end walmart customer it could be 4 to 5 . Plus you have the gas increases. I see risk of a slightly negative comp and you could see that dividend yield actually approach 3 . Plenty of companies and consumer of a 3 or higher dividend yield. Is that what youre hearing a lot of courtney . I think so. There just really is concern that this is not a onetime thing. That this is going to take folks awhile to feel comfortable with these new levels of pay that theyre taking home. If gas prices keep going this way. Think about the rate, moving up 45, 50 cents in a month. Thats a huge increase for that walmart consumer. Its concerning and i dont think that walmart is going to get a trade down from folks that maybe would have happened in the past because those higher income earners, it doesnt impact them as much. The higher payroll and gas prices. Thats not going to make them jump down. So if you lose that core customer at least a bit for a time and then you dont get the trade down, thats going to hurt traffic and comps more than likely. Chris, you mentioned your concerns but the stock has also been coming down a little higher this morning. Its been coming down since last week. Yeah. So is there a price where you think, okay, this is already factored in . Yeah, i mean i think if you look at the price and you put a 3 dividend yield on it, thats about 63 dollars which i think is the downside, the downside case in the stock currently. Whats the upside case . Our price target is 74 which is based on a 13 times p e multiple, which is they basically bracketed our numbers for 13 which was about four cents below the street. How do you look at some of their competitors and the stocks from Dollar General, or some of the others in the discount area . Is there anybody who fares better than walmart . Yeah, absolutely. I mean, i think moving up a scale you would say target first and then costco. Target has Household Income thats about 20,000 more per year. About 64,000. Much higher than walmart. Less of an impact from gas prices and payroll tax. Then you look at mighty costco. Theyre a 96,000 average Household Income. What was the average . 96,000. So that consumer is that going to be affected by the payroll tax. Okay. Chris, thank you for joining us and courtney well keep checking with you this morning. Coming up well have a breaking economic data. Its thursday. So well get those jobless claims. And numbers also cpi at 8 30 and then winners and losers in the Retail Sector. Special retail edition of our whats working now series from discounters just talking about to luxury brands. I know what youre thinking. Transit fares as in the 37 billion transit fares we help collect each year. No . Oh, right. Youre thinking of the 1. 6 million daily Customer Care interactions xerox handles. Or the 900 Million Health insurance claims we process. So, its no surprise to you that companies depend on todays xerox for services that simplify how work gets done. Which is. Pretty much what weve always stood for. With xerox, youre ready feal business. Bob will retire when hes 153, which would be fine if bob were a vampire. But hes not. Hes an architect with two kids and a mortgage. Luckily, he found someone who gave him a fresh perspective on his portfolio. And with some planning and effort, hopefully bob can retire at a more appropriate age. Its not rocket science. Its just common sense. From td ameritrade. Welcome back to squawk box, everyone. Breaking news for you. Shares of Chesapeake Energy rising this morning after the Company Reported better than expected quarterly earnings. This news comes just a day after chesapeake said an internal investigation of the financial dealings of outgoing ceo Aubrey Mcclendon found no intentional wrongdoing. When we come back, we have two key economic numbers. Inflation and employment. Those are the data points well get. We are just minutes away from cpi and the closely watched weekly jobless claims. As we head to a break take a look at the u. S. Equity futures. At this point the dow only down by about 25 points below fair value. That is much better than when we started out this morning. Some of that from walmart which is trading higher. How do traders using Technical Analysis streamline their process . At fidelity, we do it by merging two tools into one. Combining your customized charts with leadingedge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. We like this idea so much that weve applied for a patent. Im colin beck of fidelity investments. Our integrated Technical Analysis is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Welcome back to squawk box, we are just seconds away from the january cpi and the closely watched weekly jobless claims number. Both are key numbers because the inflation picture is one thats been so worrisome because its not been higher and its something the fed watches very closely and weekly jobless claims, we know everything from the fed is riding on the jobless and unemployment picture at this point, too. Markets are watching both of these key events very closely. Weve been keeping an eye on the u. S. Equity futures. And yesterday was the worst day in the markets in 2013 for both the s p 500 and the nasdaq. You see some red arrows continuing today with the s p off by still more than four points, and the nasdaq down by about 10 points. Of course, we are off the worst levels of the morning. These two numbers, though, could have an impact on this. Rick santelli is standing by at the cme in chicago. We have john riding from new york with us. Ring, take it away. And the survey says unchanged on headline cpi for january. But once you strip out food and energy, hotter than expected. Up 0. 3 . Look at the wide scope pictures. Headline up 1. 6. A tenth cooler than our last look. About equal to expectations. Just about the allimportant food and energy on year over year core up 1. 9. Exactly like our last look. And about 0. 1 hotter than expectations. Initial jobless claims for the current week rose 20,000. 20,000 from a 1,000 a 1,000 revised number. 3. 41 moves up to 4. 42. Add 20. You end up with the 362,000, on the current read. I guess most notable. Metrics on europe dont look as good as expected. Whether economic output or Service Sector numbers. Whats fascinating is the dollar denominated auction is kind of the new junk bond the worlds enamored with. Funding . Thats one issue. The economy, another. Its just a matter of time before there has to be reconciliation. Interest rates moving down. The euro getting tagged on some of that data. Just look at their equity numbers. Percentages are all in red. Back to you. Rick, stick around. Lets bring in john riding as well. Hes the chief economist and Founding Partner at rdq economics. And john were going to look at these numbers today. The jobless claims. The cpi that you got to put it all in context with what we heard from the fed yesterday. What jumps out the most to you . Lets start with the jobless claims numbers. This backup to 20,000 is nothing to worry about. Weve had surprisingly low readings. A lot of volatility in claims at the beginning of the year. So if we put it in context the fourweek average of claims from the back of the envelope calculations is going to be about 357,000 or therebies. And thats around or slightly below where we were in the latter part of last year. So theres no weakening of the labor market. Although the increase in 20,000 sounds dramatic. The cpi is old data. But the 0. 3 core could be a little worrying. Because why do i say its old data . Earlier your guests were talking about higher gasoline prices. Those arent factored into the january numbers. We calculate that the gasoline prices could add 0. 5 to the cpi in february. So all of a sudden you can start to get an inflation number that could be a little bit troubling. But remember the fed set a 2. 5 inflation threshold on inflation, before even think about changing this Monetary Policy stance. John, how do you add in everything we heard from the fed yesterday . It sounds like a lot of confusion. Its sitting around the table trying to figure out which way the winds are blowing for the economy. But also worrying about what all this extra qe3 it sounds like for the first time youre really figuring about the cost and figuring out how to start winding some of that down. Does this sound to you like a fed that is going to continue with qe3 through the end of the year . You think theyll pull it back a little sooner . I think its going to continue for awhile. I think howard put it well earlier on your show when he said this really isnt hawkish, there is divisions, however, within the fomc, and there are some people who are concerned about the costs, the potential costs of quantitative easing. Those people are concerned about it back in august, before it was initiated. We have to remember, the fed expanded qe3 in december, and here we are in february. Looking at the fomc minutes. Saying are the fed changing their mind already . So i think the reaction was a function of where the market had gotten to, and it was an excuse for correction, rather than being a dramatic shift in what the feds signaling here. Rick, your thoughts . You know, as a trader, many like to keep it much more simple. When you see the fed have some anxieties behind closed doors and probably not enough anxieties to take the core that really controls policy and programs to the road but you see how the market responds, doesnt matter how far stocks have gone. Doesnt matter about all the personal feelings about how much benefit stocks have through these programs, all that matters is in the blink of an eye, basically, the dow, the s p, the nasdaq, Global Equities reversed. Why . Because you can see in the tape that the fed is integral into where theyre trading. And i think thats key. Do i think the fed is going to stop any time soon . Absolutely not. But theres already rumblings, anxiety is contagious. And when your embers start showing a little theres members of congress im hearing going to be trying to get more in tune with what bernanke is doing and what his exit strategy may be. So that contagiousness of the minutes is going to move probably towards a congressional direction, and if you think its messy now, just wait till they get their fingers and toes in it. Rick i thought we already determined that all these emperors are already naked. What do you mean theyre showing a little leg . They have no clothes in the first place. They definitely dont. So i guess i dont know. Maybe theyre peeling back some skin then. How is that . Just noticing them . Maybe the market is just noticing. I dont want to see bernankes leg. I dont want i dont know. The funny part, joe, youre absolutely right. The funny part is why does a naked emperor have a roomful of tailors, thats the real question. Yeah, what are they there for . I dont know. Well, that did sum it up pretty well in trader in trader terms. But i did like what greg was talking about, though. He talked about, you know, all the stuff i hadnt been thinking about. The return of the pick. The return of all these esoteric loans that really arent backed by the necessary credit because people wouldnt you know people are getting lax again based on how much free money is out there. You know the underwriting standards have come down again. Thats one of the dislocations when you set market prices not at the market, thats what happens. Absolutely. You know, i dont know if anybody at the table read jenkins over the weekend when he gave us his two cents on electric cars, and the subsidies. But yeah, misallocation of capital is at the epicenter of some of the unintended consequences we have no idea are going to merge down the road. John, what were you going to say . I actually agree with that part from rick that you do get malinvestment when you have negative real Interest Rates which is what the fed has engineered. But i disagree that the fed thinks its an unintended consequence. The fed wants to force people out youre right, john. And thats how they think managing policy is going to work. I have to think its a bad idea. And i do remember what happened in 2007 and 2008 as a consequence of the feds policy in 2003 and 2004. But nevertheless, i dont think the fed is pulling back any time soon. In a way we agree. I think bernanke and yellen and dudley are fully on board with this and are going to push it. So its not an unintended consequence. But i guess what im referring to is lets go even further into the rabbit hole on this. Maybe its an unintended consequence they want but that could grow to monumental proportions that they dont see at this point. I completely agree with that. The fed dont even recognize the role in the 20072008 mortgage and financial crisis, which the seeds of which the management policy in 2003 and 2004. They dont see it then. They certainly wont see it now. Even better. So they know theyre doing it. They dont even know its wrong. Thats even better. Well put, joe. Perfect. Anyway oh, go ahead. No . Im trying to make it seamless here. Okay. Were going to make this really smooth. Thanks me, now . Now . You talk. Me, thanks to rick and john. Riding. John riding and rick. Got it. You got through it. How was that . Very smooth. Coming up a special retail edition of our whats working now series. And dont miss squawk box tomorrow. Youre kidding me. Love this part. You see this . Awesome. Why am i the last to know these things . Should i answer . Our guest host will be st. Louis fed president jim bullard. This is awe that is incredible. Going to ask him about the economy, the markets and the feds exit strategy. Welcome back to squawk box this morning. Weve been taking the pulse of retail all morning in light of the latest buzz over walmart. More retailers are worried that delayed tax returns and rising payroll tax may be putting some pressure on shoppers to tighten their purse strings, and may signal a drop in consumer demand. At least thats the worry. Right now well see how much of a worry it is. Were joined by two analysts from different sides of the retail spectrum. Morgan stanley retail analyst Kimberly Greenberger and peter king, Senior Research analyst at piper jaffray. And both of them sort of come to this from different places. Kimberly, lets talk about some of the high end stuff that you think is working. And then well talk about some of the lower end stuff. Were going to put walmart probably in that lower end category. Kimberly, what is working for you right now . The market has been incredibly robust and in fact through the Holiday Season the hand bag market was the single best growing market in the soft line space. We also look at the intimate apparel category. Victorias secret which is hosting very nice numbers. A couple of ways to play that theme, coach, and also limited brands. So, you look at to the extend that you care about walmarts earnings this morning, you think what as a result of them . Well, we are cautious in general on retail this year and we downgraded the sector. The Retail Sector at Morgan Stanley to cautious early in january. The payroll tax increase we think is going to be a significant headwind for retailers this year. Unfortunately the burden of the higher payroll taxes this year are falling squarely on the shoulders of the low and middle income consumer, and we think thats the consumer being most pressured at this point. The walmart news this morning would seem to confirm that. Before we go to keith, one last question. Jcp. What do you think . You know, weve been underweight jcpenney throughout the transformation. Its been a bit of a rocky road. We do think that ultimately if you look out sort of three years that the transformation is likely to pay off. We do think, however, in the meantime that the Free Cash Flow coming out of this business will become increasingly strained and we could see this company tap its revolver as soon as the Third Quarter this year. That, we think, is very negative for the equity and we think it will be a number of years before jcpenney is able to attract a Critical Mass number of consumers that are higher income, the consumers theyre trying to get into the store. That process is slow. It will take a number of years. Does ron johnson have the time . Meaning will the board kick him out before then . Will the strategy actually have the opportunity to pay itself off . I think that depends entirely on the tenor of samestore sales growth or declines in the second half of the year. If this new shop and shop strategy, 40 of their 700 Larger Stores will be in the new shop and shop strategy by q3 we think the board will support them. If we see continuing disappointing results there is a question mark. Peter keith, lets talk walmart first. What does this mean to the space that you cover . For the dollar stores, which is what i cover, i dont cover walmart but we see theres three meaningful headwinds on the lower income consumer this year thats taking place right now. And in order of importance id put it first on the delay in tax refunds. Secondly id put it on the payroll tax cut expiration that was mentioned earlier. And lastly were starting to see gas prices up 6 yearonyear. But the delay of tax refunds i think is particularly significant right now, and thats going to be a shorterterm effect, as of tuesday were running about 25 billion dollars lower yearonyear, and thats just simply due to timing from the irs, delaying when they recei d received or began processing the refunds. So ultimately youll see a bit of a pickup in lower income spending we think as you get into march and the refund activity picks up a little bit. But the fullyear outlook for the lower income consumer is definitely a bit depressed compared to the last few years. And whos a winner and whos a loser in that regard . In my space, i would look at it by income rankings. And so Family Dollar and Dollar General are going to cater to the lower income segment of america. Dollar tree is more of a middle income, suburban customer thats going to be less impacted by the payroll tax cut, and the gas prices. So, just from a standpoint of the economic head winds i would place dollar tree as the one thats probably the most resilient out of the group. You guys own any of the stocks theyre talking about . No. Zero . Youre not touching any of this . Not why not . They think its working. Were still more interested in companies that have their own levers to pull so were more interested in for example a Packaging Company such as sealed air where theres a new ceo in place who can cut costs and has high costs that he can trade down and still trades at a discount to its peers. Retail is not for you . No, no, no, i didnt say that. Dont own Dollar General. Tiffany i think that its very dangerous to underestimate the resilience of the American Consumer. And one of the big positive surprises of the last couple of years, and what was worse economic landscape was that the American Consumer was spending, and retail sales have held up very well. Are we undergoing little fiscal cliff adjustment here in the first half of this year . Yeah, looks like we are. But its not a big deal. And if we can grow payrolls by 160, 170, 175,000 a month youre going to see consumer incomes going up. Youre going to see that Consumer Spending is going to take care of itself. You want to take advantage of this somewhat bit of a cloud over the group right now, to buy some of their stocks. Kimberly give me one more stock. We do like macys this year. They have incredible 360 degree initiatives around e commerce and instore fulfillment cross channel Inventory Management which we think is a winner in the Department Store space. We own that. You do . Kimberly, you know, is lundgren like the best looking retail ceo . Hes a great no hes a great operator but wouldnt you agree is he not quite handsome. But man that is terry has done an amazing job kimberly at consolidating federated the old federated. Thats right. And knocking out competitors that nobody thought he could do. I used to cover retail it was a pretty he hates when im just making probably does. Right . You know handsome man. I think hes a hand some man. And a proud man. He is. Id be proud. Thanks to kimberly and to peter keith. Thanks, guys. Well see you soon. Thank you. When we come back, stocks on the move ahead of the opening bell. Were going to check in with jim cramer at the new york stock exchange, next. And wow we have a lot to talk about with him today. Still to come, the unveiling of the stock of the day. Squawk box is coming right back. Revolutionizing an industry can be a tough act to follow, but at xerox weve embraced a new role. Working behind the scenes to provide companies with services. Like helping hr departments manage benefits and pensions for over 11 million employees. Reducing document costs by up to 30 . And processing 421 billion dollars in accounts payables each year. 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Things respect that bad there you hold, you buy, you do what . Wall smart battleground now. Shorts covering, i dont know whether the longs want to come in. Im worried about that particular consumer maintaining momentum. I have always trusted walmart. Walmart says problems with the tax receipts but things are coming back, i think it is fine, not one of my favorite stocks. What else are you looking at this morning . Looking the a couple guys giving google 1,000 price target, the kiss of death t that has if they used 999 price target, i would feel better. I dont like to see that is too bullish. Did you see the video, talking about google, the google glasses, did you see know what im talking about . Google glasses versus apple versus an apple watch, i want the glasses. The Google Chrome continues to make a lot of inroads, too with a touch screen people like. Google has the momentum now, you put that 1,000 price target on it you start thinking thats too bullish. You saw the story about cream put on a lot more computers shall compete against android and microsoft s it possible five years from now, we are all using devices, laptops and tablet these are all either chrome or android . No, because i think that apples got a terrific operating system. But microsoft is out . Chrome is cheap. Microsoft . Xbox and skype. Thats over . Skype has 2 billion in revenues. But windows is done for you yeah. Im stuck with it. I wish that the it people would catch up. It people all over the world, at least in our country, seem deeply involved in the microsoft system, yet i dont know anyone who actually would choose it of the younger generation. Younger generation mocks those of us who grew up and used microsoft. We should get our premarket charts figured out with it before we switch operating systems, jim. Dont you think havent watched in the morning, jim, let them work on that before you switch operating systems. I think you have a pretty smooth operations, guys, not going to knock you, i love to watch. Jim, we will leave it there, see you in just a few minutes. Thank you a. Thanks. Coming up, the last word on the market, from our guest host, howard ward. Im only in my 60s. Ive got a nice long life ahead. Big plans. So when i found out medicare doesnt pay all my medical expenses, i got a Medicare Supplement insurance plan. [ male announcer ] if youre eligible for medicare, you may know it only covers about 80 of your part b medical expenses. The rest is up to you. Call and find out about an aarp Medicare Supplement insurance plan, insured by unitedhealthcare insurance company. Like all standardized Medicare Supplement plans, it could save you thousands in outofpocket costs. Call now to request your free decision guide. Ive been with my doctor for 12 years. Now i know ill be able to stick with him. Youll be able to visit any doctor or hospital that accepts medicare patients. Plus, there are no networks, and you never need a referral. See why millions of people have already enrolled in the only Medicare Supplement insurance plans endorsed by aarp. Dont wait. Call now. How do traders using Technical Analysis streamline their process . At fidelity, we do it by merging two tools into one. Combining your customized charts with leadingedge analysis tools from recognia so you can quickly spot key trends and possible entry and exit points. We like this idea so much that weve applied for a patent. Im colin beck of fidelity investments. Our integrated Technical Analysis is one more innovative reason serious investors are choosing fidelity. Now get 200 free trades when you open an account. Stock of the day walmart, earnings beat the street. Revenues vitally shiz for the Current Quarter, a little bit shy on guidance. Cramer saying you get short the stock when you think theres some bad news, do it at your own peril, the stock is up 1 this morning. U. S. Customersng